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(Calculating the geometric and arithmetic average rate of​ return)  The common stock of the Brangus Cattle...

(Calculating the geometric and arithmetic average rate of​ return)  The common stock of the Brangus Cattle Company had the following​ end-of-year stock prices over the last five years and paid no cash​ dividends:

Time

Brangus cattle Comapny

1

​$1313

2

99

3

1111

4

2323

5

2929

a.  Calculate the annual rate of return for each year from the above information.

b.  What is the arithmetic average rate of return earned by investing in Brangus Cattle​ Company's stock over this​ period?

c.  What is the geometric average rate of return earned by investing in Brangus Cattle​ Company's stock over this​ period?

d.  Which type of average rate of return best describes the average annual rate of return earned over the period​ (the arithmetic or​ geometric)? ​ Why?

a.  The annual rate of return at the end of year 2 is

nothing​%.

​(Round to two decimal​ places.)

Solutions

Expert Solution

jeff jeffy answered 10 months ago
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